What happens if your company refuses to pay over withheld payroll taxes?

The Department of Justice recently filed a lawsuit against a construction company and its principal for continued failure to pay over to the IRS withheld employee payroll taxes.  The US is seeking a civil injunction to require that Defendants comply with the laws, prohibit Defendants from making payments to other creditors with withheld employee’s funds, and require that Defendants file monthly reports with the IRS. 

This injunction comes after years of failing to pay over withheld payroll taxes and failure to voluntarily comply with IRS administrative collection.  The moral of this story is twofold.  First, if a Taxpayer fails to voluntarily comply, the IRS will pursue its remedies to obtain a judicially enforced compliance.   Second, withheld payroll taxes (and other taxes) must be timely paid over to the IRS to avoid the steep escalation of accrued penalties and interest.